How Much Can a Telco Afford to Invest in Faster Internet Access?

How much should any tier-one service provider invest in its internet access capabilities?
Much depends on the market dynamics: whether that firm’s role is wholesale-only; wholesale and retail; or retail only or mostly.
But in every case, the fundamentally-sound position is to invest only to the point that an adequate return on capital can be made. The level of return might be dictated wholly, or in part, by a government entity that caps the rate of return. In other markets the rate of return is limited by the amount of competition and risk of stranded assets.
In the U.S. market, some are not optimistic. Jonathan Chaplin, New Street Research equity analyst, believes cable companies could have 72 percent market share in 2020, with as much as 78 percent share of the internet access market.
Some might argue, given such trends, that telcos should simply harvest their internet access customer base. Of course, such forecasts likely include an assumption that telcos must either upgrade to fib…

"Insight" is the Outcome AI Delivers

All of us have heard the phrases “data-driven business” and “digital transformation” as hallmarks of the way firms will have to evolve

Add insights-driven to that list. Though we are in the early days, that phrase is supposed to refer to the way firms mine the data they own to develop insights about customer behavior that can, in turn, be used to drive sales, retention and profit margins.

“Insight” is another way of saying “knowledge” or “understanding” about actual patterns in customer and prospect behavior, with the ability to apply such understanding to actual product features, processes and delivery, in a predictive way.

And without belaboring the point, such insights, the result of data mining using artificial intelligence or machine learning, already have been deployed in some business processes such as customized content, search, customer service operations and e-commerce.

Some firms have ad advantage, though. Etsy, the e-commerce site, created a “dedicated research department t…

One Interesting Factoid from Verizon's 3Q 2017 Report

Just one interesting observation from Verizon’s third quarter earnings report, which probably was better than most had expected. Note just one indicator, voice connections, which shrank seven percent. At that rate, Verizon loses half its voice revenue in a decade.
That is one illustration of the argument that tier-one service providers must replace half their current revenue every decade.

Despite the shift to unlimited plans and heightened competition in the mobile services market, Verizon managed to add a net 603,000 mobile connections, 486,000 of those being the highly-regarded postpaid accounts.
Operating revenues also were up, year over year. Even Verizon’s wireless segment posted higher revenue, year over year.

source: Verizon

Massive MIMO Deployments are Inevitable

It is not hard to predict that use of massive multiple input-multiple output radio technologies is going to grow, as advanced 4G and 5G networks are built. Massive MIMO is required to make use of vast new spectrum resources to be released in the millimeter wave region to support 5G.
In fact, massive MIMO is intrinsically related to use of small cells, ultra-dense cell networks and millimeter wave frequencies.
Massive MIMO trials or limited deployments in 2017 were undertaken by Sprint, Deutsche Telekom, China Mobile, China Telecom, China Unicom, Singtel, T-Mobile Netherlands, Vodafone Australia, Optus, and Telefónica. Massive MIMO also is being developed by Telecom Infra, the open source telecom infrastructure effort.
The spectrum bands at which many of these trials have taken place include 2.5 GHz, 2.6 GHz, 3.5 GHz, 1.8 GHz, and 2.3 GHz. Except for 3.5 GHz, the remaining frequencies are also allocated for LTE in many countries. Telecom Infra is testing much-higher frequencies (60 GHz…

Why a Massive New Gigabit Upgrade, Instead of DirecTV Acquisition, Made No Sense

Two years ago, when DirecTV was acquired by AT&T, it would have been easy to find detractors arguing that AT&T should have spent that money investing in fiber to home infrastructure. With linear video cord cutting possibly accelerating, the new version of that story is being heard again.

So what should AT&T have done with $67 billion, assuming a 4.6 percent cost of capital? Cost of capital is the annualized return a borrower or equity issuer (paying a dividend) incurs simply to cover the cost of borrowing.

In AT&T’s case, the breakeven rate is 4.6 percent, which is the cost of borrowing itself. To earn an actual return, AT&T has to generate new revenue above 4.6 percent.

First of all, AT&T would not have borrowed $67 billion if it needed to add about three million new fiber to home locations per year. Assume that was all incremental capital, above and beyond what AT&T normally spends for new and rehab access facilities.

Assume that for logistical reasons, A…

SD-WAN Growing 70% Annually, MPLS 4%

Only one fact about software-defined wide area network services is incontestable: its growth rates dwarf  growth rates for MPLS, a service some believe eventually could emerge as a replacement for some portion of MPLS demand.
A new forecast from International Data Corporation estimates that worldwide SD-WAN infrastructure and services revenues will see a compound annual growth rate of 69.6 percent and reach $8.05 billion in 2021.
MPLS, on the other hand, will grow at about four percent rates through 2021.
source: Ovum
The most significant driver of SD-WAN growth over the next five years will be driven by increased reliance on cloud computing, big data analytics, mobility, and social business, IDC says.
Use of those tools generally increases network workloads and elevates the network's end-to-end importance to business operations, including support at all branch locations.

Which Way for Retail Internet Access Pricing?

We are about to see an unusual test of internet access pricing; unusual only in the sense that the direction of retail pricing in the internet era has been down, in a cost per bit basis and generally even in an absolute cost basis.
The test is a thesis some advance that U.S. cable companies--especially Comcast--will be able to boost retail internet access prices dramatically in coming years. That would run counter to past trends, and assumes that competition in internet access space will not increase.
Prices are complicated though, as one broad pattern has been for prices to remain roughly flat while speeds have grown dramatically, in some cases as fast as Moore’s Law might predict, at the high end of the market (what it is possible for a consumer customer to buy from an internet service provider such as Comcast).
That means sharp declines in cost per megabyte per second of speed might not be seen in posted retail prices. Also, pricing trends also reflect consumer decisions to spend m…